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Corporate cash holding and firm value


  • Cristina Martínez-Sola
  • Pedro J. García-Teruel
  • Pedro Martínez-Solano


This study contrasts the effect of cash holding on firm value for a sample of US industrial firms during 2001--2007. The study tests empirically for the existence of an optimal cash level that maximizes firm value. Second, the study analyses whether or not deviations from the optimum cash level reduce firm value. The results show a concave relation between cash holding and firm value, verifying the existence of an optimum level of cash holding. Additionally consistent with the initial analysis, deviations above and below optimal cash holding decreases the firm value.

Suggested Citation

  • Cristina Martínez-Sola & Pedro J. García-Teruel & Pedro Martínez-Solano, 2013. "Corporate cash holding and firm value," Applied Economics, Taylor & Francis Journals, vol. 45(2), pages 161-170, January.
  • Handle: RePEc:taf:applec:45:y:2013:i:2:p:161-170
    DOI: 10.1080/00036846.2011.595696

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    References listed on IDEAS

    1. Ali, Héla Hadj & Lecocq, Sébastien & Visser, Michael, 2010. "The Impact of Gurus: Parker Grades and en primeur Wine Prices," Journal of Wine Economics, Cambridge University Press, vol. 5(01), pages 22-39, March.
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